When it comes to the role of remittance on financial inclusion for families, this can be seen through two aspects: First, it provides a source of income for many families, which allows them to maintain their standard of living. Second, it also helps to improve their financial status by increasing their savings and investments.
In a recent study by the IMF (International Monetary Fund), it was found that remittances with low ratios of remittances to GDP (Gross Domestic Product), tend to reduce financial inclusion when used as a formal financial method. Alternatively, remittances with high ratios of remittances to GDP, above 13% on average, that are used as formal financial and usage channels, often enhance financial inclusion significantly.
What is Financial Inclusion?
Financial inclusion is an economic concept that refers to the ability of individuals to access and use financial services. It is often used synonymously with the term inclusive finance, which includes a broader scope than just banking services.
Ideally, financial inclusion means that everyone should have access to a bank account, credit, or insurance. It also means that people are able to save money and make payments electronically rather than having to go to a physical bank branch every time they need to pay or receive money.
The objective of financial inclusion is to provide everyone with equal opportunities to participate in society through economic growth and development. Especially for those who already have some kind of financial access but still face barriers to using it properly for their needs.
Financial inclusion can mean different things depending on who you ask, but most descriptions could include:
Accessibility: All people should have equal access to financial products and services regardless of their personal net worth or company size. Everyone should be able to open a bank account or apply for a loan — even if they don't have any collateral or credit history.
Affordability: Financial products should be priced in accordance with individual circumstances, so that anyone can afford them without being burdened by high costs or interest rates.
So, how does remittance play an important role in financial inclusion for immigrant families?
Remittance is one of the fastest growing segments in the financial services industry. Easily becoming a major financial solution for families by helping people send money back home to support family members abroad.
In a World Bank study, a large household data set was used to analyze the receipts of internal remittances from households in countries like Guatemala, and international remittances from the United States. Contrary to other previous studies, this study finds that instead of spending solely on consumption, households receiving remittances tend to spend 45 and 58 percent more on investment goods like education, health care, and housing respectively, than households with no remittances. This is often seen to contribute favorably to a country's economy.
There are currently a high percentage of families that rely on remittance services in over 70 countries. This significantly accounts for at least 4% of their country’s GDP, demonstrating how remittances can fuel socio-economic growth and development, including providing financial services to those families living in rural areas. So it’s no surprise that remittance services are a big deal in enabling financial stability for many families overseas.
The challenges of remittance
Money transfer services offered by banks and companies like Western Union and MoneyGram are widely used for sending money abroad. However, these services can be expensive and might take too long. Transferring funds through these services can take anywhere between two days to a week depending on the amount transferred, which may cause significant problems for people who need the money immediately or in case of emergencies. Moreover, there are high fees involved in these transactions that can significantly reduce the amount of funds received by recipients and even prevent them from receiving the exact amount of money they need after the end of each transaction.
Remittance through Tempo: a timely solution for maintaining financial stability in families
Every year, millions of people send about $601 billion (USD) home to their families through various channels such as banks or money transfer services like Western Union or MoneyGram. And as we know, this process can take extra time, effort and extra money in fees, which means that migrant workers have to sacrifice a good portion of their earnings when they send money back home. This also makes them vulnerable because they have no control over the length of time the money is being sent or the exact amount that will be received by their family members.
With the help of remittance services such as Tempo, the innovative platform created by Future Fintech Labs, immigrants can now easily send money back home without having to worry about any red tape or government regulations. They can easily transfer money from anywhere in the world through their smartphone using the app.
And right now, Tempo is giving away $25 when you send money via the app. Offering customers a chance to earn money while sending money (but only for a limited time).
Providing reliable financial solutions for families is important. In cases where the head-of-household or breadwinner are foreign workers in different countries, families may not have immediate access to solutions that would give them financial security or personal development opportunities.
Remittance can allow family members to save and grow their earnings, especially if there are trusted platforms to send money quickly and securely. Additionally, the ease of use of these platforms also helps to solve specific cultural and technological challenges people face.
This is why Future Fintech Labs has created Tempo — the cutting-edge platform that provides remittance services with its users in mind. Tempo is one of such platforms that offers a unique, and timely service, which includes making it easier for people to send money anywhere in the world quickly and at an affordable rate. Offering remittance solutions that follow proper policies and procedures, combined with creating innovative ideas to make people's lives better.
Download the app and take advantage of our limited time offer.